Worried by the sustained increases in the headline inflation rate to five year high in May, the Monetary Policy Committee, MPC, of the Central Bank of Nigeria, CBN, yesterday raised the Monetary Policy Rate (MPR) by another 100 basis points (bps) to 14 per cent from 13 per cent.
The MPR is the benchmark interest rate that guides all other rates in the money market.
Yesterday’s increase represents the second consecutive hike in the MPR in within months, as the Committee had, at its meeting in May and for the first time since September 2020 jerked up the MPR by 150 basis points to 13 per cent from 11.5 per cent. The May 2022 mark-up signalled a reversal of the apex bank’s monetary tightening policy and is aimed at addressing persistent rise in the headline inflation rate which has risen to 18.6 percent as at last month from the 2022 opening point of 15.6 percent, showing a 3000 bpts rise in just six months._
Announcing the decision to further raise the MPR, at a press briefing at the end of the MPC meeting in Lagos, yesterday, the Governor, CBN, Godwin Emefiele, stated: “The MPC noted that the current upsurge in price levels remains a primary concern to monetary policy as Members focused on the optimal policy approach required to address this development while protecting the fragile recovery.
“As regards the decision as to whether to tighten, loosen or hold members were unanimous and so did not consider both loosening or retaining rates at existing levels at this meeting. This is because on loosening, the MPC felt loosening will worsen the liquidity condition in the economy and further dampen the money market rates necessary to stimulate savings and investment. “Members also felt that loosening will trigger the weakening of the exchange rate, which will pass through to domestic prices. “MPC did not also consider holding rate constant because the whole stance will suggest that the bank is not responding sufficiently to pull the global and domestic price developments as inflation numbers continue to trend aggressively upward. And as regards tightening policy, members were unanimous that given the aggressive increase in inflation coupled with the resultant negative consequences particularly of purchasing power of the poor as well as retarding growth, there is the need to continue to tighten.
“However the committee was unanimous about the level of tightening needed to drain inflation, without dampening the actual output which will result in a higher cost of borrowing. “Apart from narrowing the negative real interest rate members were also of the view that tightening will signal a strong determination of the bank to aggressively address its price stability mandate and portray the MPC sensitivity to the impact of inflation on the vulnerable households and the need to improve their disposable income.
“Members also noted that the last 150 basis points hike by the committee in May have not permeated enough in the economy to halt the rising trend in inflation and noted that the month-on -month percentage point increase in headline inflation rose sharply in June 2022 compared with May 2022.
“MPC also noted that other complimentary administrative measures deployed by the bank to address the growth in money supply did not moderate the inflationary trend.
“The committee thus voted unanimously to raise MPR. One member voted to increase the MPR by 150 basis points. Six members by 100 basis points; One member by 75 basis points and three members by 50 basis points.
“Consequently, the committee resolved to increase the MPR by 100 basis points from 13 per cent to 14 per cent.”
RT200 records $3bn
Meanwhile, Emefiele also announced that the CBN, yesterday, signed the payment of N20 billion rebate to exporters that have conducted their export activities under the RT200 foreign exchange programme in the second quarter of the year.
